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The pound continued its rise, strengthening above the $1.27 mark against the US dollar following the Labour Party’s decisive victory led by Keir Starmer in the parliamentary election after a period of uncertainty under the previous Conservative government.
Looking ahead, the pound could face increased volatility as attention now turns to Labour’s economic policies and the Bank of England’s forthcoming decisions on interest rates.
All eyes are now on how the new government will manage its spending commitments given Britain’s fiscal constraints. The anticipated rate cuts by the Bank of England are expected to play a pivotal role in shaping the pound’s and treasury yield trajectories in the coming weeks.
While premiums for holding UK gilts over German bonds have remained stable this year, they could decline now that the election’s results are known, providing more clarity on political leadership. In contrast, the US dollar remains weak, near three-week lows, amid anticipation of key payroll data.
The Non-Farm Payrolls (NFP) report, due later today, is expected to show a gain of 190K jobs in June, a considerable drop from May’s increase of 272K. A lower-than-expected NFP figure could put pressure on both the dollar and US Treasury yields.
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